|
 Industry
Insight from Fred Barstein
April Opportunity Index Forbearer of
More Consolidation in the 401(k) Market
WHILE THE CONTINUING decline of the 401kExchange Opportunity Index¹ is
just one of the many factors that will force dramatic change
among DC service providers, it is becoming increasingly
important. There is nothing like declining sales coupled
with falling revenue in the form of lower account balances
to get the attention of CFOs and CEOs reporting quarterly
earnings to shareholders and analysts. The Opportunity
Index for all markets under $100 million were under 5%
with the Mid Market ($10-$100 million) under 4%, a huge
decline from April 2007 at 9.69% and an almost 1% decline
from March 2008. Even worse, many plan sponsors that
indicate a likelihood to change will eventually stay with
their current record keeper.
Other changes that will
force continued consolidation epitomized by the recent
announcement of the purchase of CitiStreet by ING include:
-
Price
deflation precipitated by fee disclosure (see 408(b)(2)
which becomes effective next year)
-
Continuing
high costs of distribution
-
Shift away
from higher priced, actively managed mutual funds
-
Increased
competition from institutional money managers moving
down market
-
Credit crunch
converting buyers into sellers
The only real
differentiation available to providers is whether they can
prove that they are more successful in preparing
participants for retirement which involves even more
investment. Meanwhile, all the attention and changes in the
market bode well for experienced advisors who are
dramatically increasing their businesses at the expense of
direct sold providers and blind squirrels.
¹
Percentage of plans that indicate they are currently
searching or thinking of changing providers
|
MICRO MARKET (<$1 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
10.10% |
7.70% |
6.78% |
4.64% |
|
# PLANS IN PLAY |
13,248 |
10,109 |
8,902 |
6,086 |
|
Inc/Dec Prev. Yr (%) |
1.4% |
-23.7% |
-11.9% |
-31.6% |
|
SMALL MARKET ($1-$10 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
9.36% |
7.52% |
5.80% |
4.05% |
|
# PLANS IN PLAY |
3,014 |
2,419 |
1,865 |
1,304 |
|
Inc/Dec Prev. Yr (%) |
-6.0% |
-19.7% |
-22.9% |
-30.1% |
|
MID MARKET ($10-$100 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
13.13% |
10.17% |
6.59% |
4.01% |
|
# PLANS IN PLAY |
577 |
447 |
290 |
176 |
|
Inc/Dec Prev. Yr (%) |
20.2% |
-22.5% |
-35.2% |
-39.1% |
|
LARGE MARKET ($100 MILLION-$1 BILLION) |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
9.48% |
5.29% |
6.28% |
3.04% |
|
# PLANS IN PLAY |
82 |
46 |
54 |
26 |
|
Inc/Dec Prev. Yr (%) |
-28.8% |
-61.8% |
68.3% |
-73.3% |
|
TOTAL MARKET (<$1 BILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
ASSETS |
$51,845,034,733 |
$35,071,816,033 |
$31,400,403,035 |
$17,710,653,218 |
|
ASSETS % INCREASE/YR |
-2.8% |
-32.4% |
-10.5% |
-43.6% |
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